New Delhi: Closing a personal loan can bring relief to borrowers, but the credit score may not change immediately. Even after a bank or lender confirms that all dues have been paid, the loan account may continue to appear as outstanding on the borrower’s CIBIL credit report for some time.
Delays in updating lender records and sharing information with credit bureaus can explain why a loan closure is not reflected immediately. However, if a closed loan continues to show an outstanding balance, it may affect the borrower’s credit profile and create difficulties when applying for another loan.
Why your CIBIL report may not reflect loan closure
Banks and other lenders generally share updated loan information with CIBIL every 30 to 45 days. As a result, borrowers may have to wait for the next reporting cycle before the closure appears on their credit reports.
In some cases, the lender may have received the final payment but failed to mark the account as closed in its internal records.
Outstanding charges can also delay the process. These may include additional fees for early loan closure, late payment penalties or Goods and Services Tax (GST).
Technical problems while transmitting information from the lender to CIBIL may further delay the update.
How an unchanged credit report can affect borrowers
Lenders often review credit reports before approving loan applications. If a personal loan continues to appear as outstanding after repayment, it can create uncertainty about the borrower’s existing financial obligations.
An incorrect outstanding balance or loan status may also affect how lenders assess a credit application. Borrowers should therefore verify that their loan closure has been properly recorded rather than assuming that the lender’s confirmation will immediately update the credit report.
Steps to take after closing a personal loan
Borrowers can take several steps to check whether their loan has been closed correctly and resolve any reporting discrepancies.
1. Keep the loan closure certificate
Ensure that the full loan amount has been paid and that the lender has officially closed the account. Keep the loan closure certificate or No Objection Certificate (NOC) as proof.
2. Check the latest CIBIL report
Download the latest credit report and examine the relevant loan account number, account status, outstanding balance, last update date and payment history. These details can help identify whether the information is incorrect or has not yet been updated.
3. Contact the lender
If the loan continues to appear as outstanding, contact the bank or financial institution and ask whether it has informed CIBIL about the closure.
The lender can help establish whether the delay is due to its internal records, pending charges or the reporting process.
4. Raise a dispute with CIBIL
If the lender confirms that the correct information has already been submitted but the credit report still displays an incorrect status, borrowers can raise a complaint through CIBIL’s official dispute-resolution process.
They should retain the relevant documents and monitor the complaint until the discrepancy is resolved and the report is corrected.
Verify the update instead of ignoring the discrepancy
A personal loan being fully repaid does not necessarily mean that the credit report will reflect the closure immediately. Reporting cycles, incomplete account updates, unpaid charges and technical issues can all contribute to delays.
Borrowers should retain proof of repayment, review their latest credit reports and contact the lender if the account continues to show an outstanding balance. If the incorrect information persists after the lender has submitted the necessary update, raising a dispute with CIBIL can help address the issue.